Gold rallies close to $700 an ounce

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USD Index : 80.57

Gold futures rallied to trade just below $700 an ounce early Thursday, boosted by dollar weakness, strength in oil prices, very strong physical demand and safe-haven buying.

Gold for December delivery rose $6.40, or 0.9%, at $697.10 an ounce on the New York Mercantile Exchange. It touched an intraday high of $698.50.

"A teetering U.S. dollar, the ability to absorb all the gold thrown at it by shorts trying to cap the market and the fact we're now entering its strongest seasonally favorable period, have all combined to set us up for a near perfect storm that should take us over the psychological $700 barrier," said Peter Grandich, editor of the Grandich Letter, in emailed comments.

The dollar was mixed against its major counterparts after the European Central Bank decided to hold its key interest rate steady at 4%. The Dollar Index, which tracks the greenback against a basket of the world's major currencies, edged down 0.02% at 80.60.

Crude oil for October delivery rose 60 cents at $76.33 a barrel, further bolstering gold prices.

"Gold is being supported by a weaker dollar and near record oil prices again," said Mark O'Byrne, director at Gold and Silver Investments Ltd., in emailed comments. "The continuing uncertainty in the financial markets is likely to be leading to an increase in safe haven buying as well."

On Wednesday, gold finished 80 cents lower at $690.70 an ounce.
"The metal has sprung into action this morning as the good demand seen in Asia has spilled over into early European trade," said James Moore, analyst at TheBullionDesk.com, in a research note.

"While the rate decisions today and payrolls data tomorrow may trigger some profit-taking, gold does seem to have found some momentum of its own this week, suggesting the metal's safe-haven attributes have well and truly kicked in," Moore said.

Other metals prices were also mostly higher. December silver rose 11 cents, or 1%, at $12.465 an ounce and October platinum rallied $14, or 1%, at $1,287 an ounce. December palladium gained 70 cents at $337.55 an ounce, while December copper fell 0.7 cent at $3.2560 a pound.

Gold warehouse inventories rose by 7,335 troy ounces to stand at 7.07 million troy ounces, according to Nymex data as of late Wednesday. Silver supplies fell by 619,959 troy ounces to stand at 131.4 million troy ounces, with copper supplies fell 13 short tons to stand at 20,692 short tons.

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